Gold leads commodities plunge on outlook for dollar, economy

PTIMar 20, 2008, 04.32pm IST

SINGAPORE: Gold fell to its lowest in a month, leading a drop in commodity prices, after the dollar rallied and concern that US-led slowdown in the global economy will reduce consumption of raw materials.

Oil, copper and soybeans dropped for a second day. The US fuel demand in the past four weeks averaged 3.2 per cent less than a year earlier, the Energy Department said. The dollar gained against the euro and the yen.

Gold has plunged 9.5 per cent from its record 1,032.7 an ounce on March 17 after the Federal Reserve cut its lending rate by 75 basis points to 2.25 per cent.

Commodities have slumped almost 10 per cent from their highest ever level in the past three weeks. The UBS Commodity Index fell 4.1 per cent to 1,427.958, led by declines in soybeans, wheat and cocoa. The index of 26 commodities dropped in three of the past four sessions.

Gold for immediate delivery dropped 2.8 per cent to 917.91 an ounce in Asia today while the dollar has recovered 1.9 per cent from a record low against the euro.

Crude oil for May delivery fell 1.22 dollar, or 1.2 per cent, to 101.32 dollar a barrel on the New York Mercantile Exchange. The oil price slumped along with other commodities resulted from the dollar staging a rally as investors found a trigger to focus more on fundamentals.

Copper declined on the London Metal Exchange on concern the reduction in borrowing costs won't be enough to keep the US from slipping into a recession. Corn and soybean also fell in Chicago as the dollar's rally reduced the appeal of commodities as an inflation hedge.